Holiday Tronc & Holiday Pay: What Operators Need to Know - and Why Independent Payroll Matters
Dan Hawkie, Chief commercial officer at TiPJAR
You may have seen recent headlines about holiday tronc and holiday pay, with some commentators even calling the impact “nuclear” for hospitality. No surprise this has caused confusion — and even the misconception that tronc should now be paid to staff while they’re on holiday.
Let’s clear that up: the tribunal did not say tronc should be paid during holiday.
What it said is this: when calculating holiday pay, employers need to factor in what a worker normally earns from tronc. In practice, that means holiday pay should include an additional amount that reflects typical tronc earnings. Importantly, this does not mean the money can or should come out of the tronc pot itself.
The Employment (Allocation of Tips) Act 2023 and its Code of Practice however, is clear: tronc must be shared fairly among staff working in the place where service charges are collected. Taking tronc away from working staff to fund holiday pay for those not at work would seem to go against both the letter and spirit of the Act.
Think about it – paying tronc on holiday doesn’t mean anyone gets more: tronc doesn’t magically grow when someone is on holiday, and 100% is always distributed. Paying tronc on holiday only changes when people get it, not how much there is or how much they get. It also risks unfairness – if some staff take more holiday, they benefit at the expense of others. Seasonal staff, who often take no holiday but are paid in lieu at the end of a contract, would lose out most.
It sounds and feels good to claim that paying tronc whilst people are on holiday is “fair” – but that reflects a misunderstanding. Tronc is always a share of what there is: if you pay it to people not working, it has to be taken away from those who are.
Those choosing to pay holiday tronc should consider the risk they run from Tribunals saying this isn’t fair to those not on holiday. The implications are also as yet unclear whether employers are expected to top up to cover tronc in other moments where an employee isn’t at work but due an amount based on their usual “wage” – whether ,maternity, paternity, sickness, compassionate or gardening leave.
The real issue highlighted by the tribunal is this:
If you’re paying tronc through your company payroll, it starts to look like “wages” when holiday pay is calculated. That could create new liabilities for employers who have been running tronc in this way.
Why this matters for operators
If tronc processed through payroll is deemed to form part of wages, employers may have to fund additional holiday pay based on an employee’s average tronc earnings. That means higher labour costs, employer NIC contributions, and potential claims for back pay.
These figures based on employers offering statutory 28 days holiday and an average 5-day working week, hence 5.6 weeks of tronc due to team members on holiday.
These are ballpark figures, but they show just how quickly liabilities can mount once employer NIC is also factored in.
What legal experts are saying
It has been reported that law firm Fieldfisher commented that the safest solution is to operate tronc through an independent payroll to ensure payments cannot be confused with wages. After years of some traditional troncmasters resisting this model, even they are now moving in this direction — but change takes time, leaving many operators exposed.
How TiPJAR protects you
Our model has always been built with independence at its core:
- A completely separate payroll entity manages all tronc payments.
- TiPJAR independently handles every element of tronc administration, allocation, and distribution.
- Your business has no role in the calculation or payment of tronc.
This means:
- Complete clarity about what is tronc and what is wages.
- No additional holiday pay or NIC liability created by tronc.
- Full compliance with the Allocation of Tips Act and Code of Practice.
What operators should do now
If your tronc is currently run through payroll, you should:
- Audit your process — establish whether tronc could be treated as wages.
- Assess potential liabilities — even rough calculations can be eye-opening.
- Move to independence — whether with TiPJAR or another provider, ensure tronc is separated from payroll as soon as possible.
Final thought
The recent case law has made one thing clear: independence is no longer optional. Operators who continue to run tronc through payroll risk significant new costs and claims. Those who act now to separate tronc from payroll will not only protect themselves but also demonstrate compliance leadership in an area under increasing scrutiny.
At TiPJAR, our clients already have this protection built in. For them, the latest headlines are a reminder of why they chose us. For others, they’re a warning shot that now is the time to act.
Disclaimer: The contents of this article are TiPJAR’s opinions only and are only intended to summarise our understanding of the subject matter and offer further clarity on some of the points and implications of the subject matter. Nothing in this article should be construed as providing legal or financial advice. TiPJAR recommends that every operator take their own independent legal and financial advice on the subject matter of this article
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